NEW TECHNOLOGY WEEK,  Volume 8, Number 13, Monday, March 28, 1994 (page 3-4)

"China Tech Spying In U.S. Massive, Analyst Finds"
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By Gene Koprowski 


  An analyst employed by the U.S. Defense intelligence Agency is charging that
the people's Republic of China has mounted a wide-ranging intelligence
operation among whose aims is to infiltrate U.S. high-technology companies and
research institutions in order to steal Commercial secrets. 

  In his forthcoming book, Chinese Intelligence Operations, Nicholas Eftimiades
claims that China  has created front companies in Hong Kong to purchase U.S.
Computer technology that is otherwise denied it by export controls, and that
Chinese intelligence organizations are making commercial sleuths of students in
the sciences, thousands of whom leave China every year for educational
institutions abroad. 

  Scheduled for release in the coming weeks by the  Naval Institute Press, an
independent nonprofit publisher headquarters in Annapolis, the book is based
on scores of conversations Eftimiades had with Chinese spies over three years
in the Washington, D.C, area. Many of the meetings took place in such public
locations as parks and were set up with the help of Coded Signals passed via
telephones and electronic pagers. 

  Efimiades adopted these methods, which seem to come straight out of a novel
by  William F. Buckley or John Lecarre in an attempt to break new ground.  "We
in the West were suffering from a void of data  about China," he told New
Technology Week in an interview. "There was nothing to work from." 

  One of his book's main themes is that China hungers for western technology,
not only military but commercial. "There is such a massive drive for
technology," Eftimiades observes. You're talking about building an economy .One
of the main forces  behind this campaign for technical knowledge is the
country's Ministry of State Security, but Chinese provincial authorities
sponsor worldwide spying as well, he states. 

  Much of the technology for which the Chinese thirst, from  flexible
manufacturing systems to  computers to integrated Circuits,  "can be obtained
legally,"  Eftimiades explains. "They resort   to stealing when it is
cost-prohibitive or illegal to acquire." 

     U.S. law enforcement agencies,  such as the FBI, tend not to pursue cases
of theft with vigor, charges  Eftimiades, because the technologies involved are
not necessarily  cutting-edge. Most of them, in fact,  are so-called "mid-level
technologies" such as second-generation computers or night-vision technology
covered by export controls.  Equipment is sent back to the China, where experts
attempt to  reverse-engineer it---so classified materials are not at risk, but
damage to U.S. security is done. 

     An example that Eftimiades mentions is that of an  alleged Hong Kong front
Company called Hua Ko. ln  1979, right after the U.S. opened diplomatic
relations  with China, the company created another alleged  front, a
California-based firm called Chipex, that  illegally exported high-tech
equipment from the U.S.,  he claims. 

    According to the book, this type of Commercial  spying has been increasing
dramatically . About 50  percent of 900 illegal tech transfer cases reported on
 the West Coast of the U.S. in recent years were  committed by Chinese. And the
number of cases  occurring during the most recent five-year period was  double
that of the previous five-year period,  Eftimiades says. 

    The rise  coincides with  an increase in  Chinese  military  spending
estimated to  be running 90  to 115 percent higher this year than in 1989. "The
vast majority of that is for technology . . . for the air and naval forces,"
Eftimiades states. "This is for force projection . To expand China's military
reach." 

   He points to an incident involving Mamco Manufacturing lnc., a Seattle
aircraft parts manufacturer. "In February l 990, the U.S., citing national
security concerns, ordered the Chinese National Aero-Technology Import and
Export Co. (CATIC) to divest itself of that company, according to Eftimiades,
book. 

   "The Bush administration said publicly that CATIC had a "checkered history",
and had sought technology  that would provide the Chinese   People's Liberation
Army's Air   Force with in-flight refueling capabilities. More disturbing to
administration officials was the belief that   CATIC used Mamco as a front to  
penetrate other, more promising areas   of restricted technology."  The book  
also describes 1984 attempts to   acquire advanced radar and electronic
surveillance technology   illegally and transport it to the   People's
Republic. 

     "Chinese businessmen see the   illegal transfer of high technology   not
as a criminal act but as a simple   business transaction,"  Eftimiades  
declares. Another attitude he high-lights is the long-term view of  
intelligence operations taken by   China. 

     According to the author, the   Chinese phrase "fish on the bottom of   the
ocean"  describes China's method   of penetrating foreign institutions. 
Chinese students going to the U.S. may be instructed to  do nothing for five
years other than study and make  contacts. "They put them in high-technology
fields: The  majority of them have advanced degrees in the hard  sciences," 
Eftimiades writes. 

    "In 1O years, they get security clearances. Now they  are U.S. Citizens,
and they are activated for spying. U.S.  security clearance checks only go back
1O years,"  he  notes, "so it is bard to detect them. These types of 
intelligent assets are devastating." 

    The U.S . has been short-handed in its struggle to  detect these spies,
Eftimiades contends, because of a  scarcity of Chinese-speakers in its
intelligence community. Moreover since China is not as obvious a physical 
threat to the U.S. as the Soviet Union was, policymakers  have not focused  on
it. But now that  the Cold War is  over, Eftimiades  argues, China  must be
examined  with new eyes: It  is a nation trying  to reclaim its  destiny as a
regional power at a time when global trade  is having an increasing impact on
U.S . policy. 

    Eftimiades himself used an improbable weapon to  penetrate the secrecy
surrounding the operations he was  investigating. Many of his sources, he says,
agreed to be  interviewed because he assured them of his book's  scholarly
intent. Scholarship has an esteemed place in  the Chinese culture, and even
though Eftimiades told  them he was employed by a U.S. intelligence agency, 
those he interviewed did not feel that they were betraying their country by
speaking to someone for a work of  scholarship' he says.